Author: Mindao, Source: Author’s Twitter @mindaoyang

Today we will talk about micro-strategy and big strategy.

Micro-strategy is really the biggest golden egg in the currency circle in this cycle. In less than two years, the nominal profit has exceeded 15 billion US dollars.

It is not just triple arbitrage of stocks, bonds, and currencies. The key is to turn MSTR, a stock, into a real Bitcoin in traditional finance (recently, the trading volume of MSTR has exceeded the total number of Bitcoin ETFs). It can be described as "borrowing money" The pinnacle of "cultivation".

Michael Saylor is neither a blue blood on Wall Street, nor can he be considered an OG in the currency circle. He is really a master who was beaten to death by random punches.

Here I will briefly discuss some key parts of his trading structure design:

There are two key flywheels between these two, one is the issuance of stocks at a premium, Buying Bitcoin drives the rise of Bitcoin and increases its net assets and earnings per share. This is a linear leverage;

The second flywheel is financing to buy coins, which accelerates profit growth and expands valuation multiples ( p/b, p/e becomes larger), the stock price jumps from linear to exponential leverage, and the market cap and stock price increase exceed the price increase of Bitcoin itself.

The market value of MSTR rises, promoting the entry into more indices, more trading derivatives, rising trading volume, reducing the cost of stock and debt financing, and the structure of debt and equity, further reducing overall liabilities Rate rate.

MicroStrategy’s convertible bonds are also a very exquisite design (full of Buffett’s wisdom).

Convertible bonds are basically medium and long-term bonds (5-year term, spanning at least 1 currency circle cycle). Most of them have zero interest, and no principal will be repaid during the period. This ensures that there is no pressure on partial repayments and interest payments during the period, and further reduces the risk of debt default caused by the downward spiral of currency prices.

What’s even more amazing is that, unlike traditional convertible bonds, the options for stock conversion and cash repayment lie with the micro-strategy rather than with the convertible bond holders, fundamentally avoiding the inability to repay the convertible bonds upon maturity. Leading to default problems (in the worst case, all shares will be directly transferred). This financing premium capability is extraordinary.

Although it is generally believed that bond issuance increases the debt ratio and risk premium, which is detrimental to the stock price, this kind of convertible bond is essentially a "debt-equity" tool where the initiative lies entirely in the micro-strategy. Very stock/shareholder friendly.

Bonds are denominated in US dollars. From a currency standard standpoint, the purchasing power is infinitely close to zero, and the initiative to convert conditions lies in the micro-strategy. Borrow a "debt" whose purchasing power is infinitely close to zero to buy it. Bitcoin with unlimited purchasing power, especially the structure with zero default risk, is a win-win situation in the long run.

In the currency circle and traditional finance for many years, I have never seen such an expert who can play such an extreme triple arbitrage of stocks/bonds/currencies.

Many people have speculated whether the outcome of micro-strategy will be the stock version of Luna. I think there is no comparison between the two in terms of overall risk structure, let alone the so-called death spiral.

As for when the flywheel stops turning and when the music stops, the core lies in how long the high premium of stocks and single stocks can be maintained.

If the market trend breaks expectations, the supply of Bitcoin derivatives increases, and the stock/coin premium of the micro strategy shrinks to less than 1.2, this kind of financing will be difficult to sustain. But micro-strategy will still be the big winner.

Micro-strategy, a structural construction of long-term winning potential, is comparable to Buffett’s Berkshire Hathaway in the traditional financial world.

From the perspective of premium level, it feels easier for MSTR to reach 1 trillion than for Ethereum to reach 1 trillion.